Change Your Mind Lyrics – The All-American Rejects

I got a head start this week in doing some review for my November trading and one thing that has really stuck out to me is how often I have been switching my bias with a stock trade. A key element in my trading is the trade design, ensuring I have flexibility – because I want that, but nonetheless I have noticed an increase in switching a bias much more frequently.

I have several example just this week alone, but will use my $ANF trade to highlight where I started from – and where things stand now. Here are the specifics of the initial trade idea and execution:

This was a “to fade” play after earnings. I decided that it was a move that could be faded.

Because of this view, I kept that is on my “to fade” list and ultimately initiated a short position at $46 on 11/26

Later that day I added a November 43.5/45/46 Bear Collar for a $.06 credit

Now let’s move on to the adjustment that was made this week once I saw what the market thought about $ANF:

Even though I have an option Collar on a position, it does not mean that I don’t also use a trail stop on the underlying stock. It is for this reason that I will, from time to time, close out a stock position and convert a Collar to a Risk Reversal trade. In this case, the Bear Collar becomes a normal Risk Reversal trade.

I am short the November 43.5 Put and long the 45/46 Call Spread, same expiration (tomorrow). With this in mind, I need to manage the CS to ensure I get optimum value for it soon. I don’t expect a need to address the short Put, it should expire tomorrow.